Following the Coinbase data breach, Nic Puckrin, crypto analyst, investor and founder of educational platform The Coin Bureau says crypto users are lacking an understanding of crypto security. Joe Pickard hears more.

PBI: How is a lack of education around crypto security putting people off investing?

Nic Puckrin: Much of what people see in the headlines about crypto is either doom and gloom predictions, or stories of people losing all their wealth in a crypto scam. So this already creates a stigma around crypto investing.

On top of this, the idea of self-custody is scary for most people, because the majority would rather trust a bank or an institution than themselves. So for many people, the solution is just not to invest at all.

The inclusion of crypto in investment apps like Robinhood has made access easier, so people are experimenting with crypto more now. But in some ways, it’s worse, because they haven’t taken the time to educate themselves about the risks.

PBI: What are the main differences between general online security and crypto-security?

NP: Many of the principles are similar. The main difference is the fact that if you fall victim to a scam and your money is stolen from a traditional financial institution, you may be able to get your money back. With crypto, if the theft is from your non-custodial wallet – that’s it. As they say, not your keys, not your crypto. If a fraudster manages to get hold of your private key, there’s nothing you can really do. 

You also have to be more vigilant when it comes to crypto transactions, because there are some really sophisticated scammers operating in the crypto space these days. If you send money to the wrong bank account, you’ll almost certainly be able to get it back. If you send crypto to the wrong wallet address, it’s gone.

PBI: How can preventative security measures such as education keep up with professional criminals targeting crypto?

NP: The crypto space moves really quickly and criminals are getting more and more inventive. So, you have to be heavily involved in the crypto space to follow these developments. If you’re not working in this sector, it can feel somewhat overwhelming trying to keep on top of it. 

As an individual, the best option is to follow a few reputable educational channels in the crypto space that talk about security and follow those instead, on X or YouTube, for example. Keeping up with developments in crypto is basically a full-time job, but there are now a lot of people working in this sector full-time. So, when in doubt, see what the experts have to say.

PBI: Why do you think exchanges are focussing more on educating on crypto volatility risks than security?

NP: They’re required to determine whether investors understand the volatility under the investor protection rules, but there is no rule about security, especially when it comes to self-custody. The problem is that these rules were developed for traditional finance, where there’s no self-custody risk. In crypto, this risk can arguably be greater than the volatility risk, if you consider that volatility typically results in partial (often paper) losses, while misunderstanding how self-custody works and giving away your seed phrase – which is the key to any crypto wallet – could cost you all your assets. 

This is just another argument for regulators to develop crypto-specific rules, because crypto isn’t like traditional finance. It shouldn’t be lumped in with banking or traditional investment services. The risks are a lot more multifaceted, and the education needed – much greater.

PBI: What difficulties are there in educating people on this subject?

NP: The main difficulty is that crypto isn’t as intuitive as traditional finance. Private keys, seed phrases, this all seems frightening to people when they first come to crypto. Plus, the idea that they can’t just get their assets back after a scam is hard to understand for people used to traditional investment or banking – especially if they’re using a centralised crypto exchange, which look and feel a lot like a normal investment app these days. 

On top of this, new threats and types of attacks are constantly emerging in the digital asset space. Phishing scams, pump-and-dump schemes, rug pulls, airdrop scams – there’s so much to keep on top of. When it’s too overwhelming, most people just lose track.

PBI: You said that more people now know how to invest in cryptocurrencies but there is a lack of knowledge on how to keep these funds safe. What do you think has contributed to this knowledge gap between investing and crypto security?

NP: As an industry, we are collectively responsible for this knowledge gap. Projects have been focused heavily on marketing, exchanges – on attracting customers with giveaways and perks, and crypto influencers often tout new coins that are the current “flavour of the month”. It’s been about ease-of-access and ease-of-use, but security has been an afterthought. 

With the high volatility of the crypto market, much of the content around security has been focused on not “putting all your eggs in one basket”, rather than keeping those eggs in the basket once they’re there. 

At Coin Bureau, we’ve been careful to balance market commentary with educational content that focuses on all aspects of crypto, including security, but much of the content that ends up on X, for example, is just promotional or shilling certain projects.